REEEP

Clean energy microfinance in the Pacific

Fiji, 09.02.2010 - (written by REEEP Secretariat for SEAP)

Reducing fossil fuel dependence in the Pacific Islands Luse Kinivuwai from the Foundation for Development Cooperation (FDC) in Fiji is looking for a small victory – to wean Pacific Islanders off kerosene. It’s a bit like trying to get someone to give up smoking or stop biting their nails. Like smoking, kerosene is both expensive and a health hazard. It also leaves its users at the mercy of sudden price spikes.

Kerosene is used everywhere in the Pacific. Most Pacific islanders use kerosene for household lighting and cooking. For those with low incomes it is the default fuel.

Ms Kinivuwai said islanders are effectively ‘burning their money away’, like the kerosene they use to power their lamps and stoves. “At the same time they expose themselves and their children to many risks,” she said.

“Kerosene is generally used with naked flames and brings with it the risk of fire, burns and indoor pollution. It also looks like water, but swallowing it is harmful or even fatal. There are many other issues, but in short we want to help people in remote areas like the Pacific to change over to safe, efficient and sustainable sources of power.”   

”Alternative, clean technologies such as solar PV-powered LED lamps are available, but their use – and the use of other renewable energy and high-efficiency products - is hampered by a general lack of basic information, in-grained habits and financing. You try finding a major bank on a remote Pacific Island and see how you go – particularly if you earn little or no cash income and very few assets to offer as collateral.”

Although many poor people are not well placed to invest in new technology Ms Kinivuwai said a solution in many of these areas is being provided by microfinance institutions (MFIs) that are keen to take on lending for energy services.

”MFIs provide capital to grassroots, low income earners. Within a decade they have grown enormously in the Pacific region, providing basic financial services such as credit and savings to help poor clients set up small businesses, expand existing ones or cater for family needs,” she said.

Much of the financing for MFIs comes from “development funding” and comes from a mix of non-profit and commercial sources. Up to now there has only been limited use of microfinance services to finance energy-related technologies and equipment in the region. However, MFIs are able to provide basic, accurate information on renewable energy and energy efficient solutions to clients and to offer consumer financing for solutions that meet the needs of households and microenterprises.

Ms Kinivuwai said the entrepreneurial spirit of many MFI clients means they can also help expand the footprint of renewable energy to remote locations.

“Building the commitment of microfinance institutions to provide loans for renewable energy and energy efficiency products is the core idea behind the Pacific Renewable Energy and Microfinance project now underway in Fiji, Samoa and Vanuatu, being implemented by The Foundation for Development Cooperation (FDC). The project is funded by the Renewable Energy and Energy Efficiency Partnership (REEEP).

During the first week of December 2009, a week-long training program for 18 practitioners from 9 MFIs from Fiji, Samoa, and Vanuatu took place in Suva, Fiji.  Microfinance institutions from all three nations took part, including the Fiji Council of Social Services Microfinance Unit and National Centre for Small and Micro Enterprise Development, Cooperatives Microfinance Unit, Rewa Microfinance Institution, the South Pacific Business Development and Women in Business Development from Samoa, and Vanwods Microfinance, Inc. from Vanuatu. The goal of the session was to train the MFIs on the available renewable energy and energy efficiency solutions, and to provide planning tools on how to conduct a market needs assessment to determine the renewable energy needs of their clients and strategically incorporate these new products into their business plan.

It is estimated that training the MFIs will help expose 33,000 clients in over 200 communities to access information on renewable energy solutions. The multiplier effect can directly impact 200,000 people in the three countries.

The next phase of the project will see the FDC working with the microfinance institutions to ensure the participants conduct energy needs assessments to identify current and prospective energy needs, suppliers and training needs in the value chain. This will also lead to the actual development of innovative, sustainable loan products for renewables and energy efficiency.

Ultimately the project aims to help communities reduce their reliance on fossil fuels through affordable and accessible renewable energy and energy efficient technologies. There will also be the global benefit of a reduction in greenhouse gas emissions.

The Foundation for Development Cooperation is an independent, not-for-profit international development organisation. Through alliances and partnerships, FDC undertakes a range of initiatives which seek to improve the lives of poor people in developing countries.

Updates on the progress of the PREM Project will be available here on the REEEP website and at www.fdc.org.au  and www.microfinance-pasifika.org.

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